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County of Kaua'i v. Hanalei River Holdings Ltd.

Intermediate Court of Appeals of Hawaii

March 31, 2016

COUNTY OF KAUA'I, Plaintiff-Appellee,
v.
HANALEI RIVER HOLDINGS LIMITED, a Cook Islands corporation; MICHAEL GUARD SHEEHAN; PATRICIA WILCOX SHEEHAN, as Trustee of that certain unrecorded Revocable Trust Agreement of Patricia Wilcox Sheehan, dated December 21, 1994; PATRICIA WILCOX SHEEHAN; GAYLORD H. WILCOX; DANIEL H. CASE; GROVE FARM COMPANY, INC., a Hawaii corporation; HUGH W. KLEBAHN; DONN A. CARSWELL; PAMELA W. DOHRMAN; ROBERT D. MULLINS; WILLIAM D. PRATT; RANDOLPH G. MOORE; and the Heirs and/or Assigns of JOHN B. BROSSEAU, also known as JOHN BROSSEAU, JOHN B. BRASSEAU and J.B. BRASSEAU; JOHN DOES 1-200; DOE PARTNERSHIPS 1-25; DOE CORPORATIONS 1-25; DOE ENTITIES 1-25; AND DOE GOVERNMENTAL UNITS 1-25, Defendants-Appellants

APPEAL FROM THE CIRCUIT COURT OF THE FIFTH CIRCUIT (CIVIL NO. 11-1-0098)

FOLEY, PRESIDING JUDGE, LEONARD and GINOZA, JJ.

OPINION

GINOZA, J.

This case involves Plaintiff-Appellee County of Kaua'i's (County) exercise of eminent domain to take private land in which the Defendants-Appellants Hanalei River Holdings, Ltd., (HRH) and Michael Sheehan (Sheehan) (collectively, the Sheehan Defendants) owned an interest. The Sheehan Defendants appeal from a "Final Judgment As To All Claims and All Parties" (Judgment) entered April 25, 2014, in the Circuit Court of the Fifth Circuit (circuit court).[1]

On appeal, the Sheehan Defendants contend the circuit court erred by (1) granting the County's motion to withdraw a portion of estimated just compensation that had been deposited with the circuit court; (2) granting the County's motion for, summary judgment on the issue of severance damages; and (3) adopting the County's calculation for blight of summons damages.

For the reasons stated below, we vacate the circuit court's award for blight of summons damages and remand on that issue. In all other respects, we affirm.

X. Background

On May 31, 2011, the County filed a Complaint against Sheehan asserting its exercise of eminent domain to take private land for a public use, specifically to expand a public park located in Hanalei commonly known as Black Pot Beach Park. The private land at issue consists of three parcels, referred to in this case as Parcel 33 (TMK No. (4) 5-5-01-033), Parcel 34 (TMK No. (4) 5-5-01-034), and Parcel 49 (TMK No. (4) 5-5-01-049) (collectively referred to as the Subject Properties). Subsequently, the County filed a First Amended Complaint adding defendants, including HRH and Patricia Wilcox Sheehan, individually and as Trustee of that certain unrecorded Revocable Trust Agreement of Patricia Wilcox Sheehan, dated December 21, 1994 (Patricia Sheehan).[2]

On April 30, 2012, the County filed an ex parte motion for an order putting it in possession of the Subject Properties. In an attached affidavit, Wallace G. Rezentes, Jr., Director of Finance of the County of Kaua'i, stated that the County had deposited with the chief clerk of the circuit court the amount of estimated just compensation for the taking of the real property, $5.89 million, as required under Hawaii Revised Statutes <HRS) §§ 101-29 and -30 (2012).

On May 4, 2012, the circuit court entered the requested ex parte order of possession in favor of the County.[3]

On June 29, 2012, Patricia Sheehan filed an answer to the First Amended Complaint and asserted that she, both individually and as trustee, "is the owner of the fee simple interests, easements, rights of way or the express contingent remainder man [sic], to all or portions of the real property [Parcels 33, 34, and 49.]" Further, Patricia Sheehan requested that the circuit court decide the respective interests of all named defendants and that the court "determine and award the just compensation, including but not limited to blight of summons, to which Patricia W. Sheehan is entitled by virtue of the taking, and severance damages to the remaining property."

On August 16, 2012, HRH filed an answer in which it admitted it has right, title, and interest in the subject parcels. HRH also filed a "Motion to Vacate Ex Parte Order Putting Plaintiff in Possession" in which it argued, inter alia, that the appraisal used as a basis for the estimate of just compensation was seven months stale on the date of summons (the valuation date pursuant to HRS § 101-24 (2012)), thus "[i]t was stale as a matter of law and did not in good faith represent the reasonable fair market value of the property." At the hearing on the motion, HRH argued that the primary defect in the appraisal was that it did not value purported improvements made to the lots. On September 13, 2012, the court entered an order denying HRH's motion to vacate the order of possession.

On September 25, 2012, Sheehan filed an answer and admitted that "some of the identified individuals and/or entities have right, title and interest in the subject parcels [.]"

On March 11, 2013, the Sheehan Defendants filed an application for payment of the estimated compensation, requesting that the clerk of the court remit the entire deposit of estimated compensation ($5.89 million), minus the required taxes, penalties and interest, pursuant to HRS § 101-31 (2012). On March 19, 2013, Patricia Sheehan filed a statement of no position regarding the Sheehan Defendants' application for payment of estimated compensation. However, Patricia requested that her attorneys have an opportunity to review any order entered in relation to the application.

On April 2, 2013, the County filed an opposition to the disbursement of the estimated compensation asserting, inter alia, . that it was unresolved how the Sheehan Defendants would apportion the payment between the Subject Properties given that Sheehan owned Parcel 49, HRH owned Parcels 33 and 34, and the interests of Patricia Sheehan remained to be adjudicated. The County also noted that title to the Subject Properties was clouded as to exactly what interest each of the three defendants had in the properties because the tax map of the Subject Properties reflected a subdivision that was never completed. The County also contended that, in the event the jury awarded compensation in a manner different than the allocation made by the defendants, it "would have no reliable means of recouping any excess payment" because, for example, if HRH, a Cook Islands corporation, withdrew the estimated just compensation and it was later determined HRH was not entitled to that amount, the County would be forced to seek reimbursement from a foreign corporation with potentially no other assets in Hawai'i.

On the same day, April 2, 2013, the County also filed a motion to withdraw $1.03 million of the estimated just compensation on deposit with the court, contending it was entitled to adjust its estimate based on an updated appraisal of the Subject Properties that valued the properties at $4.86 million. The County asserted that its initial deposit was based on an appraisal conducted in anticipation of condemnation litigation, but, once the Complaint was filed, it obtained an updated appraisal by the same appraiser based on the applicable valuation date. May 31, 2011, the date of summons.

On April 5, 2013, Patricia Sheehan filed a waiver and release of all proceeds payable by the County in the proceedings and expressed her consent to disbursement of the proceeds to the Sheehan Defendants.

On the same day, April 5, 2013, the Sheehan Defendants filed a reply in support of their application for payment of the estimated compensation in which they asserted that none of the County's objections prevented payment. The Sheehan Defendants asserted inter alia that (1) Patricia Sheehan1s interests were now resolved; (2) the appraisal valued each parcel separately, so the money could be easily apportioned; and (3) whether HRH is a foreign corporation is irrelevant as the governing statutes do not differentiate between a local and a foreign owner.

On April 10, 2013, the County and Sheehan executed an Agreement Regarding Withdrawal of Deposit, which allowed the Sheehan Defendants partial payment of the deposit, in the amount of $4.86 million less unpaid property taxes (a total of $4, 538, 018.10), apportioned as follows: Parcel 33 -$1, 627, 295.03; Parcel 34 - $2, 294, 407.11; and Parcel 49 -$616, 315.96.[4] Further, as part of the agreement, Sheehan agreed to indemnify the County if HRH failed to repay any money that exceeded the jury verdict on Parcels 33 and 34. The parties filed a stipulation on April 10, 2013 and an amended stipulation on April 18, 2013, providing for partial payment of the deposit to the Sheehan Defendants in the amounts set forth in the agreement.

Oh April 22, 2013, the Sheehan Defendants filed art opposition to the County's motion to withdraw $1.03 million of the estimated just compensation, generally challenging the existence of any authority permitting the County to revise its estimated compensation, especially after it seized the property and the Sheehan Defendants had applied for the release of the funds.

On May 13, 2013, the circuit court granted the County's motion to withdraw $1.03 million of the deposit.

On August 13, 2013, the County filed a motion for partial summary judgment on the issue of severance damages for an area of land referred to in the Sheehan Defendants' appraisal as "Area 51." The parties agree that "Area 51" is not owned by the Sheehan Defendants. Instead, it appears to be part of a lot owned by Patricia Sheehan, Lot 127, which abuts Parcel 34, and is an area over which Sheehan had an easement to operate a boat baseyard, to the extent the baseyard was permitted by the County.

On October 3, 2013, the circuit court filed an order granting the County's motion for partial summary judgment, ruling that the Sheehan Defendants were not entitled to severance damages. The circuit court concluded inter alia that there were no genuine issues of material fact and that the Sheehan Defendants could not satisfy the unities test under City & County of Honolulu v. Bonded Investment Co., Ltd., 54 Haw. 523, 525, 511 P.2d 163, 165 (1973) [hereafter Bonded Inv. Il]. Specifically, the court concluded that there was no unity of title because HRH owned Parcels '33 and 34, Sheehan owned Parcel 49, and Patricia Sheehan owned "Area 51." Moreover, the court concluded there was no physical unity because "Area 51" did not abut the only property owned by Sheehan, Parcel 49. Alternatively, the circuit court also determined that an easement is not title to land, and that the Sheehan Defendants were estopped from claiming severance damages because they had failed to disclose the claim in any pleading or during discovery.

On November 8, 2013, after a jury trial, the jury returned a Special Verdict Form, finding that the total fair market value of the three parcels on May 31, 2011, was $5.8 million, broken down as follows: Parcel 33 (owned by HRH) - $2.03 million; Parcel 34 (owned by HRH) - $3, 016 million; and Parcel 49 (owned by Sheehan) - $754, 000.

On November 18, 2013, the County filed a motion regarding blight of summons damages {an amount paid to a land owner as a result of the government's delay in paying full just compensation for the condemned property on the date of summons). The County contended that the Sheehan Defendants were entitled to blight of summons damages (5% per annum interest) during two periods: (1) from May 31, 2011 (the date of summons) until May 4, 2012 (the date the County asserted it made its initial deposit)[5]on the full $5.8 million jury verdict; and (2) from April 29, 2013 (erroneously stated as the date the court granted the County's motion to withdraw a portion of the deposit)[6] until the date the County paid the Sheehan Defendants in full, on the $940, 000 difference between the $4.86 million already received by the Sheehan Defendants and the $5.8 million jury verdict.[7]

On January 16, 2014, the circuit court granted the County's motion regarding blight of summons damages and adopted the County's calculation of damages. On January 24, 2014, the Sheehan Defendants filed a motion for reconsideration of the blight of summons order. The circuit court thereafter denied the motion for reconsideration.

On April 25, 2014, the circuit court entered the Judgment and a Final Order of Condemnation. The Sheehan Defendants timely appealed.

II. Standards of Review

A. Withdrawal of a Portion of the Estimated Just Compensation

We consider applicable Hawai'i statutes in determining whether the circuit court was authorized to allow the County to withdraw part of the estimated just compensation deposited with the court.

Statutory interpretation is reviewed de novo by [an appellate] court. "When construing a statute, our foremost obligation is to ascertain and give effect to the intention of the legislature, which is to be obtained primarily from ' the language contained in the statute itself." Taylor-Rice v. State, 105 Hawai'i 104, 108, 94 P.3d 695, 663 (2004} (citations omitted). Moreover, "it is a cardinal rule of statutory interpretation that, where the terms of a statute are plain, unambiguous-and explicit, we are not at liberty to look beyond that language for a different meaning. Instead, our sole duty is to give effect to the ...

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